By Cliff Peale
The Cincinnati Enquirer
With strong financial results and its competitors reeling, Procter & Gamble Co. has the luxury of bolstering parts of its far-flung global operation that might not be growing as fast as it would like.
Next on chairman and chief executive A.G. Lafley's agenda is a review of the Clairol hair-color business in Stamford, Conn.
"That's where I'm heading tomorrow," he told Wall Street investors Wednesday.
Cincinnati-based P&G earned $1.82 billion during the fiscal second quarter ended Dec. 31, up 22 percent from the same period a year ago. Sales increased 20 percent to $13.22 billion. Even before acquisitions and the effect of foreign exchange rates, sales increased 6 percent and volume, or the number of units sold, increased 9 percent.
Earnings per share were 15 percent more than last year, excluding last year's restructuring charges, putting the results at the top end of Wall Street expectations and well above P&G's long-term growth targets.
Procter predicted the results weeks ago, so there was little impact on the stock market. Investors pushed P&G's share price down 56 cents to $98.52 Wednesday.
"Clearly, the stock seems to be hung up on the psychological 3-digit number," said Dan Popowics, equity analyst at Fifth Third Bank, which owns or manages more than 10 million P&G shares. "I think it will get through this in fairly short order."
Each of P&G's global businesses increased both sales and profits for the quarter. Beauty care, which includes brands such as Olay skin care and Pantene shampoo, increased sales 50 percent to $4.49 billion after the $5.7 billion acquisition of German giant Wella AG.
Beauty care profits jumped 34 percent to $681 million.
An early cold and cough season in North America led to strong health care results, with sales up 22 percent to $1.91 billion and profits up 32 percent to $333 million.
During the Webcast with investors before the stock market opened, P&G also said:
Heavy promotional and pricing activity by competitors including Georgia-Pacific Corp. - maker of Brawny and Quilted Northern - drove up P&G spending on brands including Bounty and Charmin. Higher raw material prices also contributed.
"We can easily shock-absorb these kinds of issues because we have such a diverse lineup," Lafley said. "That puts us in a situation where we really can manage for the long- and mid-term, and not get too caught up in the short-term pricing game."
It isn't worried about a challenge to its $5.7 billion acquisition of German giant Wella AG by minority shareholders. The shareholders have alleged that P&G is improperly integrating Wella, even though it owns only about 80 percent of total shares, and will present the complaints at a special meeting next week in Germany.
"We believe this event provides no added value to Wella's business," chief financial officer Clayton Daley said, calling the allegations "baseless."
Big brands continued to grow. Olay skin care, for example, grew its global volume more than 25 percent, compared to the same quarter last year.
In health care, the growth spread throughout the unit. Personal health care (Prilosec OTC, Vicks), pharmaceuticals (Actonel) and oral care (Crest) each increased volume more than 20 percent in the quarter.
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